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Probed lobbyist had stake in firms
Question of the Day
Superlobbyist Paul Magliocchetti, the focus of a federal criminal investigation, held an ownership interest in three small, privately held companies that his lobbying firm had helped obtain millions of federal tax dollars in congressional earmarks.
In effect, he was trying to profit twice from his firm’s success in getting members of Congress to set aside, or earmark, tax money for his clients in annual appropriations bills by collecting hefty lobbying fees from the companies and, at the same time, hoping to make money by investing in their stock.
While it is not illegal for a lobbyist to hold an ownership interest in a company for which he is lobbying, some watchdog officials, including Craig Holman of Public Citizen, said it is not typical. Mr. Holman describes Mr. Magliocchetti as “benefiting on both ends of the deal.”
“He is paid to lobby for earmarks and he is moving earmarks into a company in which he has a personal stake. This raises obvious conflict of interest concerns,” Mr. Holman said. “The money involved is tax dollars, which raises the bar on ethical behavior. Are the earmarks contributing to the public good, or are they just moving money into the lobbyist’s pocket?”
Spokesmen for two of the members of Congress who sponsored the earmarks said they were not aware of Mr. Magliocchetti’s ownership interests.
Federal investigators probing Mr. Magliocchetti’s lobbying activities and his congressional fundraising want to know whether he improperly reimbursed those who made donations to his favored candidates and whether he exchanged donations with members of Congress in return for earmarks for his clients.
His office and home were raided by investigators in the ongoing probe in November 2008. Mr. Magliocchetti’s firm, the PMA Group, is out of business. His attorney, William E. Lawler III, declined on Thursday to comment.
The three companies in which Mr. Magliocchetti invested nearly $670,000 received more than $35 million in earmarks while PMA was their lobbyist, records show. In turn, the companies paid PMA more than $2.3 million in lobbying fees, according to federal lobbying records.
The companies were Triosyn, a Vermont firm that makes anti-microbial masks; Cryptek Secure Communications, a Virginia company that built security products to help safeguard sensitive information; and Adsil Inc., a Florida firm that manufactures and sells anti-corrosion coatings.
As privately held companies, their stock was not publicly traded. Investors generally hope to make big profits when the firm is either sold or when it goes public.
According to a March 2004 filing in his divorce case, Mr. Magliocchetti listed the value of the stocks he held in the three companies at $725,741. But two have since plummeted: Adsil is now worth only pennies a share and his investment in Cryptek was apparently wiped out in the company’s bankruptcy last year.
Since the privately traded companies did not have to file periodic reports with the U.S. Securities and Exchange Commission (SEC), it is not clear how much money, if any, Mr. Magliocchetti may have made from dividends or stock sales.
In 2000, Adsil hired PMA to help win federal contracts and earmarks, paying the firm $140,000 in lobbying fees between 2000 and the end of 2002. In 2001, Rep. Ander Crenshaw, Florida Republican, put a $1 million earmark in the 2002 appropriations bill for Adsil on a U.S. Coast Guard contract. Adsil executives donated $5,000 to Mr. Crenshaw’s campaign funds, according to federal election records.
Crenshaw spokeswoman Barbara J. Riley said the congressman submitted Adsil’s request for funding after inheriting it from his predecessor. She said Adsils anti-corrosive technology did not ultimately pass strict Coast Guard standards and “Crenshaw submitted no further appropriations requests on the firms behalf.”
She said Mr. Crenshaw had no knowledge of Mr. Magliocchetti’s ownership stake in Adsil.
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